Statistics for Business & Economics
Statistics for Business & Economics
12th Edition
ISBN: 9781285528830
Author: David R. Anderson
Publisher: Cengage Learning US
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Chapter 20, Problem 17SE

Many factors influence the retail price of computers. The table below shows the average retail price for a computer, including both desktops and laptops, during the month of November for each of the indicated years (Wall Street Journal, December 13, 2010).

Year Average Price ($)
2007 795
2008 705
2009 580
2010 615
  1. a. Use 2007 as the base year and develop a price index for the retail price of a computer over this four-year period.
  2. b. Use 2008 as the base year and develop a price index for the retail price of a computer over this four-year period.

a.

Expert Solution
Check Mark
To determine

Find the price index for the retail price of a computer over the four-year period by using 2007 as the base year.

Answer to Problem 17SE

The price index for the retail price of a computer over the four-year period by using 2007 as the base year is,

YearAverage Price ($)Price relative in Period t
2007795100
200870588.679
200958072.956
201061577.3585

Explanation of Solution

Calculation:

The data represents the values of average retail price for a computer in the month of November for each year from 2007 to 2010.

The price index for the retail price of a computer over the four-year period by using 2007 as the base year is obtained below:

YearAverage Price ($)Price relative in Period t=Price in period tBase period price(100)
2007795795795(100)=100
2008705705795(100)=88.679
2009580580795(100)=72.956
2010615615795(100)=77.3585

b.

Expert Solution
Check Mark
To determine

Find the price index for the retail price of a computer over the four-year period by using 2008 as the base year.

Answer to Problem 17SE

The price index for the retail price of a computer over the four-year period by using 2008 as the base year is,

YearAverage Price ($)Price relative in Period t
2007795112.766
2008705100
200958082.2695
201061587.234

Explanation of Solution

Calculation:

The price index for the retail price of a computer over the four-year period by using 2008 as the base year is obtained below:

YearAverage Price ($)Price relative in Period t=Price in period tBase period price(100)
2007795795705(100)=112.766
2008705705705(100)=100
2009580580705(100)=82.2695
2010615615705(100)=87.234

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